Oil price ending 2011 near $100 a barrel

NEW YORK, N.Y. – The price of oil soared in 2011, finishing about 19 per cent higher, on average, after a volatile year dominated by concerns about global supplies

And high oil prices are expected to continue weighing on the U.S. economy as it struggles to grow in 2012.

“It’s like leaving the parking brake on while you’re trying to drive the economy forward,” said Michael Lynch, president of Strategic Energy & Economic Research.

Benchmark West Texas Intermediate crude gave up 82 cents to finish at US$98.83 a barrel on Friday, the final trading day of the year. Brent crude, which is used to price foreign oil that’s imported by U.S. refineries, fell 63 cents to end the year at US$107.38 a barrel in London.

Overall in 2011, crude prices averaged US$95.09 a barrel in New York, up from $79.64 in 2010 and US$62.11 in 2009.

The U.S. Energy Department expects prices to rise further in 2012 to an average of US$98 a barrel.

After starting the year at $91.38 a barrel, oil prices jumped in February as an anti-government rebellion began in Libya. International oil companies pulled employees from the country as the fighting escalated and oil production was essentially halted for several months.

About 1.5 million barrels of daily oil exports were cut off during the Libyan uprising. That’s less than two per cent of what the world uses, but with demand rising to 88 million barrels a day, every last drop mattered. Oil prices jumped 25 per cent from the middle of February to the first week in March.

The price of benchmark WTI rose as high as US$113.93 a barrel in April, then dropped to $75.67 by October.

Prices are again flirting with US$100 a barrel following threats from Iran to close key shipping lanes in the Persian Gulf. Iran, which has been accused of trying to build a nuclear weapon, has been threatening to close the Strait of Hormuz if the U.S. and other countries target the country with new sanctions.

The waterway is a key route in and out of the Persian Gulf, used by tankers carrying one-sixth of the world’s oil exports.

As oil prices rose this year, the global economy cut back on fuel consumption. A private survey released Friday showed that Chinese manufacturing activity slowed in December for a second month due to weak global demand amid U.S. and European economic woes.

In the United States, gasoline demand dropped by 2.5 per cent overall in 2011, according to the Energy Department. Pump prices are down 72 cents a U.S. gallon (3.79 litres) since peaking in May near US$4 a gallon. On Friday the national average for a gallon of regular was US$3.269, according to AAA, Wright Express and Oil Price Information Service. Analysts expect the average pump to rise to $4 a gallon again by spring.

In other energy trading Friday, heating oil rose 1.75 cents to finish at US$2.935 a gallon and gasoline futures rose by less than a penny to end at US$2.6863 a gallon. Natural gas futures fell by 3.8 cents to finish at US$2.989 per 1,000 cubic feet.